Stock markets drop as Wall Street looks bleakly at the economy


Traders work on the floor of the New York Stock Exchange on September 21, 2022 in New York City. Stocks fell in the last hour of trading after Federal Reserve Chairman Jerome Powell announced that the Federal Reserve would raise interest rates by three-quarters of a percentage point in an effort to continue taming inflation.

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Michael M. Santiago / Getty Images


Traders work on the floor of the New York Stock Exchange on September 21, 2022 in New York City. Stocks fell in the last hour of trading after Federal Reserve Chairman Jerome Powell announced that the Federal Reserve would raise interest rates by three-quarters of a percentage point in an effort to continue taming inflation.

Michael M. Santiago / Getty Images

Stock markets extended their decline throughout the week on Friday, with the three major indexes down more than 1% as investors who had lost faith in the global economy rushed to exit.

Wall Street has developed a bleak view of the future of the economy, with a recession looking more likely, as it digests the Federal Reserve’s warnings about what it will take to cool the nation’s frenzied inflation.

The Dow fell more than 486 points, or 1.6%, to close at 29,590 on Friday, its lowest in nearly two years. The Dow is down 4% for the week, also closing 19.59% from its most recent peak in January – bringing it to the touchline of bear markets by 20%.

The Nasdaq and S&P 500 are now in bear markets. The Nasdaq fell 1.8% to 10,868, or 32.3% below its most recent peak 10 months ago. The S&P fell 1.72% to 3,693, down 23% from its January peak.

Stock markets, as well as bond and commodity markets, were grappling with the Fed’s announcement this week that it will continue to raise interest rates until inflation is under control, regardless of recession risks.

Already this year, the central bank raised interest rates with a speed and volume not seen in a generation, hoping to slow the worst inflation the country has seen in 40 years.

Most Americans were hoping for a “soft landing,” in which the Fed’s steps to stabilize prices would only lead to a slight economic downturn. But Fed Chairman Jerome Powell made clear on Wednesday that the economy could face a “hard landing” of a sharp downturn.

“No one knows if this process will lead to a recession or if so, how important this recession will be,” Powell said at a news conference after the Fed announced a 0.75% rate hike for the third time in a row.

“However, we are committed to bringing inflation back to 2% because we believe that failure to restore price stability will mean much greater pain later on.”

Powell’s comments and a bleak outlook from FedEx, the multinational company closely linked to global supply chains, caused confusion about the future, with Goldman Sachs analyst David Kostin describing the economic outlook as “extraordinarily vague.”

“Future trajectories of inflation, economic growth, interest rates, earnings and valuations are all in flux,” Costin wrote on Friday.

He also wrote: “Based on our clients’ discussions, the majority of equity investors have taken the view that a hard landing scenario is inevitable and that their focus is on the timing, size, and duration of a potential downturn and the investment strategies for these forecasts.” .

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